Details on the Proposed Changes
Yes, the proposed changes affect retired, active and terminated vested participants. In past years when the Fund’s investments performed well, all participants benefitted through pension increases. In fact, since its inception, the Fund has paid out several billion dollars in benefits. Now, in challenging times, we feel it’s important that everyone pull together to protect the Fund’s long-term financial security by voting to reduce our benefits.
The proposed changes include:
- Active participant benefits: The accrual rate for active participants will be reduced to 1.75% for all new and past contributions. With this change, if you retire with a full pension at age 65, you will get back all your contributions in 58 months instead of the current 50 months.
- Non-Active participant benefits: Benefits for retired and terminated vested participants will be reduced by 35%. This is comparable to the reduction for active participants.
- Trustees’ ability to adjust benefits: The Trustees will be able to adjust benefits each plan year if necessary to ensure the plan does not drop below 80% funding. However, they will not be able to make an adjustment until July 1, 2021 unless a financial market downturn occurs. In addition, any adjustment by the Trustees can be disapproved by a majority vote of the participating Local Unions and a participant referendum.
In addition to the proposed changes, the Trustees have also adopted a policy clarifying that if the Fund only has enough money left to repay all participants at least all of their contributions (reduced by the benefits they have received), the Fund will be terminated and all participants will receive their total contributions minus benefits received. This is not a proposed change and will not be voted on, since the Plan already has a provision that allows this to happen.
If the changes are approved, the planned effective date is January 1, 2018.
If you are a retiree, starting January 1, 2018, your monthly pension will be reduced by 35%.
If you are an active participant, starting January 1, 2018, once you retire your monthly pension will be calculated by multiplying all contributions you made during your working career by 1.75%.
You have probably heard that many multiemployer funds and corporations are freezing or cutting back their plans. Even with the changes, the benefit accrual rate for our Fund will be far higher than those of other multiemployer plans. In addition, the changes will help ensure the Fund will not run out of money in future years, and offer the flexibility to increase benefits in the future if the Fund’s finances improve.
The proposed changes give the Trustees the ability to adjust benefits each plan year if necessary to ensure the plan does not drop below 80% funding. We cannot predict whether this will happen, but will notify participants well in advance of any changes. Also, any adjustment by the Trustees can be disapproved by a majority vote of the participating Local Unions and a participant referendum.
Our priority right now is to stabilize the Fund so that it does not run out of money. However, if it becomes fully funded over a three-year period, the Trustees have the ability to equitably improve the benefits provided by the Fund. In fact, from 1987 to 1998, the Fund increased benefits for all active and retired participants five times, by a total of 33 percent.